Commission advocates new approach to
investing public money in risky high-tech research

The Commission proposed today a new strategy for
harnessing the innovative potential of public spending in Europe in the field of
Research and Development (R&D). Europe lags considerably behind the US in
terms of R&D spending and has made catching up a priority of the renewed
Lisbon strategy. Where Europe could do substantially more is at the
pre-commercial stage, where products and services are not yet ripe for the
market, and where investment is particularly risk-prone, but is key for research
breakthroughs. This is why the Commission decided today to advocate the
procurement of public R&D spending already in this pre-commercial phase. For
the Commission, such pre-commercial public procurement could tap unused
potential especially in high tech areas, such as research into information and
communication technologies for health care and medicine. Important technological
innovations such as the Internet Protocol or the Global Positioning System (GPS)
would have been unthinkable without combined spending by the public sector and
private companies.

“Europe'spublic sector has massive buying power, but until
now it has not found a clear way to strongly link mid to long term public
purchasing needs with research and development programmes. This could become a
lost opportunity for Europe if we do not act quickly," said Viviane Reding,
Commissioner for Information Society and Media. "Only with a more pro-active,
pro-innovative use of public spending will Europe be able to equip itself to
meet structural challenges such as an ageing population and the transition to a
low carbon economy. This is why in high-tech research, we must have more
public procurement of R&D spending already at the pre-commercial phase "

"Increasing the level of research in Europe involves creating the right
environment.", said Janez Potočnik, European Science and Research
Commissioner. "A clever use of the power of public procurement could be a
great force for developing new, innovative solutions to existing challenges
facing the public sector."

The US public sector spends $50 billion per year on research and development
(R&D) procurement - half the research investment gap between the US and
Europe. Therefore it is clear that pre-commercial procurement of R&D would
help Europe meet its target to invest of 3% of its GDP into research.

Today's strategy will be the starting point for a debate with the 27 EU
Member States on where and how to focus pre-commercial procurement of R&D.
The Commission will follow-up in 2008 with concrete actions to encourage Member
States to launch such procurement actions in key areas such as in health,
transport, security, environment, ageing and energy efficiency.

The Commission Communication lays out an open and competitive approach that
allows the risks and benefits of developing new solutions to be shared between
private and public players, in line with state aid rules. This form of R&D
procurement is called "pre-commercial" because it applies to areas in which
there is no commercial offer.

By sharing the risks, public service innovations can be introduced faster and
European industry will be able to move quickly to exploit new lead markets.
Cooperation between procurers also helps to create economies of scale,
especially important for driving innovation in fast moving, globalised markets
such as information and communications technologies (ICTs).

Ground breaking technologies have been developed in this way, such as the
Internet Protocol, Global Positioning by Satellite (GPS), high performance
computing, and many advances in chip technology.

Background

Last autumn the Commission Communication "Putting knowledge into Practice: a
broad based innovation strategy for the EU" underlined the urgency for a
European public procurement strategy to drive demand for innovative goods and
services (see IP/06/1181).
Both the European Parliament and the Council responded positively, and the
Commission was asked to provide guidance on how pre-commercial procurement can
stimulate innovation respecting the EU procurement rules. Today's Commission
Communication responds to this request.

A lead example where the instrument of pre-commercial public procurement of
R&D, advocated by the Commission today, could be used is ICT for health care
and medicine (eHealth). eHealth today accounts for only 2% of the overall
European healthcare expenditure, despite the very large efficiency and quality
of service gains that it offers, for example through reduction of
hospitalisation costs thanks to home care and avoiding duplication of laboratory
and radiology examinations thanks to telemedicine systems that allow the
transfer and storage of scans. For more information: